ITV slips as investors wait for restructuring

Speculation over FTSE 100 reshuffling; HMV shares in retreat

LONDON (MarketWatch) -- ITV's shares came under pressure on Wednesday as investors panned an update by the top British commercial broadcaster, worrying about new investments that the media group plans to make.

More broadly, London's FTSE 100 (UKX) shed off earlier losses to close up 0.4%, or 22 points, at 6,306.20. Other European markets also gained ground. See European Markets.

Shares of ITV (ITV) lost 1.5%. The company said it will spend up to 200 million pounds on deals to boost content and will invest another 50 million pounds in broadband, ITV2 and high-definition.

Moreover, ITV reported a 5% rise in quarterly advertising revenue and targeted content revenue of 1.2 billion pounds by 2012. ITV is also targeting revenue growth of 3% to 5% per year over the next five years.

UBS maintained a sell rating on ITV. "The key opportunity is not so much changing the strategy as executing it more effectively," said UBS analyst Daniel Kervin.

Credit Suisse said ITV's plans for investment, at least in 2008, won't be offset by savings achieved elsewhere.

He added: "We believe there will be a better time to buy into the restructuring story once the market's earnings forecasts are more robust and the valuation more attractive."

Also on London investors' radar screens, shares of Carphone Warehouse (CPW) rose 3.4% on expectations that its shares would be promoted to the FTSE 100 after the close of trade on Wednesday.

Tullow Oil (TLW) and Taylor Wimpey (TW) may join the mobile-phone retailer in the FTSE 100, while Kelda (KEL), Segro (SGRO) and Drax (DRX) looked set for demotion to the FTSE 250.

Meanwhile, shares of Home Retail Group (HOME) rose 2.5%. The company said comparable sales at its Argos division rose 1.8% in the second quarter, with total sales up 4.8% at 942 million pounds ($1.91 billion). Comparable sales at Homebase fell 8%, with total sales down 6.2% at 391 million pounds after poor weather across the country.

While projecting a "good" first-half profit, Home Retail said it has to remain cautious about full-year results because of the uncertain outlook for British consumers.

"This is a respectable performance, particularly in Argos, given the worsening consumer environment," said Bruce Hubbard, analyst at Citigroup, who carries a sell rating.

Also in the retail segment, shares of clothing chain Next (NXT) extended Tuesday's gains, adding another 2.2%.

Both its ESAB welding, cutting and automation business and its Howden air- and gas-handling business reported strong growth in sales and operating profit, the company said.

Shares of Amec (AMEC), another engineering group, rose 4.5% on unusually high volume.

Under pressure, shares of HMV (HMV) dropped 2.9% following an analyst presentation it held Tuesday and a strong two-month run.

Lehman Brothers said two next-generation stores presented by the music and DVD retailer were impressive, with an interactive gaming zone, a juice bar and download center, and a "lighter, brighter" atmosphere.

But ABN Amro analysts said the new stores, at 100 pounds a square foot, aren't cheap and will require a roughly 20% sales increase to achieve its target payback of under three years.

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